FINRA Series 7Processes and Confirms TransactionsMedium
A customer instructs the representative to execute a special 'cash' trade (not regular way) for 500 shares of ABC stock on Monday. When must this trade settle?
- AThe next business day (T+1)
- BTwo business days after trade date (T+2)
- CThree business days after trade date (T+3)
- DThe same day as the trade date
Show answer & explanationAnswer & explanation
Correct answer: D. The same day as the trade date
A 'cash' trade is a special settlement instruction that requires settlement the same day the trade is executed, as opposed to regular-way settlement (currently T+1).
Why the other options are wrong
- A. T+1 is regular-way settlement, not cash settlement.
- B. T+2 was the former regular-way standard, not a cash trade.
- C. T+3 is not used for any standard equity settlement today.
Cash Settlement Trade
A special settlement instruction requiring a securities trade to settle on the same day as the trade date, rather than the standard T+1 regular-way cycle.
- Settles same day
- Must be specifically requested
- Regular-way settlement is T+1 for equities
Memory trick: Cash trade = cash today, same day pay.